• Re: The Slow Meltdown of the Chinese Economy

    From paul polikos@21:1/5 to David P. on Sun Jan 2 01:53:43 2022
    On Sunday, January 2, 2022 at 9:27:59 AM UTC, David P. wrote:
    The Slow Meltdown of the Chinese Economy
    By Thomas J. Duesterberg, 12/20/21, Wall St. Journal

    China is experiencing a slow-motion economic crisis that
    could undermine stability in the current regime & have
    serious negative consequences for the global economy.
    Despite the many warning signs, Western analysts & policy
    makers are optimistic that Xi Jinping is up to the task of
    managing the crisis. Such optimism is misplaced.

    The U.S. & its allies have many tools to influence China’s
    economy & need to weigh the consequences of an acute crisis
    against the threat its current trajectory poses to the U.S.
    Policy makers should be thinking of how best to deploy these
    tools, instead of passively assuming the rapid growth &
    stability of the Chinese economy will continue.

    In December real-estate developers China Evergrande & Kaisa
    joined several other overleveraged firms in bankruptcy,
    exposing hundreds of billions in yuan- & dollar-denominated
    debt to default. Real estate represents around 30% of the
    Chinese economy, nearly twice the levels that led to the
    financial crisis of 2008-09 in the U.S., Spain & England.

    The real-estate industry has been key to keeping annual
    growth above 6%. Yet a debt bubble has inflated by 20%
    annually between 2014 & 2018. Originally intended to
    accommodate rapid urbanization for the industrial economy,
    the urban property market is now overbuilt. Some 90% of
    urban households own their own properties & enough vacant
    units are available to accommodate 10 years of urban
    immigrants. Sales & prices have tumbled this year, & over-
    leveraged builders & creditors are suffering the consequences.

    After a major change in how central & local govts divvy up
    tax revenue in 1994, Chinese local officials began to rely
    on land sales for the income needed for improving infra-
    structure & social welfare. At a minimum, 1/3 of local govt
    revenues is derived from land sales. Another 10%-15% come
    from related taxes on development.

    But land sales fell by over 30% in late 2021, putting local
    finances in jeopardy. Local govts have struggled to address
    other priorities such as healthcare, pensions, environmental
    cleanup, income inequality & education. Moreover, up to 80%
    of household wealth in China is in real estate holdings, a
    hedge against weakness of the social safety net. In other
    words, an economic meltdown is a potential threat to the
    implicit social compact in China between authoritarian
    rulers & a quiescent population.

    In his zeal to reassert the dominance of the Chi-Comm Party,
    Xi has engineered a crackdown on some of China’s most
    innovative industries & the entrepreneurs building them.
    The party channels credit to state-owned enterprises to the
    detriment of the more dynamic & job-creating private industry,
    inserts operatives on the management committees of most
    enterprises, & disciplines business leaders perceived to
    resist Xi’s leadership. The clampdown on new industries such
    as ride-sharing, private education, social media & online &
    private healthcare, is especially damaging to growth.

    Xi is privileging the less productive & less innovative
    components of the Chinese economy while enhancing control,
    limiting financing & punishing entrepreneurial leaders in
    many leading industries. This isn’t a recipe for maintaining
    strong economic growth. Despite the frequent assertions that
    China is catching up or moving ahead of the West in tech
    industries, it has a long way to go to achieve the self-
    sufficiency & global leadership it seeks. U.S. sanctions on
    advanced semiconductors, for instance, have gutted Huawei’s
    ability to make its own 5G phones. China’s semiconductor
    industry is 10 years behind world leaders, according to a
    recent German study.

    China’s commercial aviation industry doesn’t have an inter-
    nationally certified jet to compete with Boeing & Airbus,
    despite 3 decades of concentrated efforts. Its biopharma-
    ceutical industry failed to produce an effective vaccine for
    Covid. Steel, batteries & high-speed rail—where China is
    competitive—are at risk of trade retaliation due to environ-
    mentally harmful production practices & theft of intellectual
    property. China’s alleged lead in AI could be blunted by
    imposing the same limits on data flows into China that it
    imposes internally, thus sapping its monopoly on big data,
    & by limiting U.S. investment in Chinese AI firms.

    China’s overall productivity levels also lag those of other
    advanced economies. Xi’s turn to state-owned enterprises &
    manufacturing certainly won’t improve this relative weakness.

    In short, it's difficult to escape the conclusion that
    China’s economy is systematically weakening & that Xi’s new
    priorities offer little hope for a quick turnaround. The U.S.
    & its allies could further compound Xi’s challenges by
    vigorous enforcement of trade laws, limiting Chinese access
    to technology & financing from the West, & imposing sanctions
    against China’s brutal human-rights abuses in Xinjiang & in
    countries in the developing world that it's trying to exploit
    thru its Belt & Road Initiative. A good example of such
    exploitation is the atrocious mining conditions for key
    battery components cobalt & lithium in Africa & South America.

    A major slowdown or acute financial crisis in China would
    certainly have a negative impact on the global economy. But
    U.S. & allied policy makers do have tools that could both
    influence the direction of the Chinese economy & help repair
    some of the accumulated damage to their economies from
    Chinese mercantilism. A first step is to undermine the
    narrative of a relentless, unstoppable economic advance
    under Xi’s leadership.

    Mr. Duesterberg is a senior fellow at the Hudson Institute
    and author of a new study, “Economic Cracks in the Great
    Wall of China: Is China’s Current Economic Model Sustainable?”

    https://www.wsj.com/articles/slow-meltdown-of-china-economy-evergrande-property-market-collapse-downturn-xi-cewc-11640032283

    The U.S. & its allies have many tools to influence China’s
    economy & need to weigh the consequences of an acute crisis
    against the threat its current trajectory poses to the U.S.

    The US and its allies are getting more and more sick with the Covid virus. The US is experiencing half a million new infections every day! Their economies will be either stagnanting or going down for another year. They will look to China for medical
    supplies of all sorts.

    --- SoupGate-Win32 v1.05
    * Origin: fsxNet Usenet Gateway (21:1/5)
  • From David P.@21:1/5 to All on Sun Jan 2 01:27:57 2022
    The Slow Meltdown of the Chinese Economy
    By Thomas J. Duesterberg, 12/20/21, Wall St. Journal

    China is experiencing a slow-motion economic crisis that
    could undermine stability in the current regime & have
    serious negative consequences for the global economy.
    Despite the many warning signs, Western analysts & policy
    makers are optimistic that Xi Jinping is up to the task of
    managing the crisis. Such optimism is misplaced.

    The U.S. & its allies have many tools to influence China’s
    economy & need to weigh the consequences of an acute crisis
    against the threat its current trajectory poses to the U.S.
    Policy makers should be thinking of how best to deploy these
    tools, instead of passively assuming the rapid growth &
    stability of the Chinese economy will continue.

    In December real-estate developers China Evergrande & Kaisa
    joined several other overleveraged firms in bankruptcy,
    exposing hundreds of billions in yuan- & dollar-denominated
    debt to default. Real estate represents around 30% of the
    Chinese economy, nearly twice the levels that led to the
    financial crisis of 2008-09 in the U.S., Spain & England.

    The real-estate industry has been key to keeping annual
    growth above 6%. Yet a debt bubble has inflated by 20%
    annually between 2014 & 2018. Originally intended to
    accommodate rapid urbanization for the industrial economy,
    the urban property market is now overbuilt. Some 90% of
    urban households own their own properties & enough vacant
    units are available to accommodate 10 years of urban
    immigrants. Sales & prices have tumbled this year, & over-
    leveraged builders & creditors are suffering the consequences.

    After a major change in how central & local govts divvy up
    tax revenue in 1994, Chinese local officials began to rely
    on land sales for the income needed for improving infra-
    structure & social welfare. At a minimum, 1/3 of local govt
    revenues is derived from land sales. Another 10%-15% come
    from related taxes on development.

    But land sales fell by over 30% in late 2021, putting local
    finances in jeopardy. Local govts have struggled to address
    other priorities such as healthcare, pensions, environmental
    cleanup, income inequality & education. Moreover, up to 80%
    of household wealth in China is in real estate holdings, a
    hedge against weakness of the social safety net. In other
    words, an economic meltdown is a potential threat to the
    implicit social compact in China between authoritarian
    rulers & a quiescent population.

    In his zeal to reassert the dominance of the Chi-Comm Party,
    Xi has engineered a crackdown on some of China’s most
    innovative industries & the entrepreneurs building them.
    The party channels credit to state-owned enterprises to the
    detriment of the more dynamic & job-creating private industry,
    inserts operatives on the management committees of most
    enterprises, & disciplines business leaders perceived to
    resist Xi’s leadership. The clampdown on new industries such
    as ride-sharing, private education, social media & online &
    private healthcare, is especially damaging to growth.

    Xi is privileging the less productive & less innovative
    components of the Chinese economy while enhancing control,
    limiting financing & punishing entrepreneurial leaders in
    many leading industries. This isn’t a recipe for maintaining
    strong economic growth. Despite the frequent assertions that
    China is catching up or moving ahead of the West in tech
    industries, it has a long way to go to achieve the self-
    sufficiency & global leadership it seeks. U.S. sanctions on
    advanced semiconductors, for instance, have gutted Huawei’s
    ability to make its own 5G phones. China’s semiconductor
    industry is 10 years behind world leaders, according to a
    recent German study.

    China’s commercial aviation industry doesn’t have an inter-
    nationally certified jet to compete with Boeing & Airbus,
    despite 3 decades of concentrated efforts. Its biopharma-
    ceutical industry failed to produce an effective vaccine for
    Covid. Steel, batteries & high-speed rail—where China is
    competitive—are at risk of trade retaliation due to environ-
    mentally harmful production practices & theft of intellectual
    property. China’s alleged lead in AI could be blunted by
    imposing the same limits on data flows into China that it
    imposes internally, thus sapping its monopoly on big data,
    & by limiting U.S. investment in Chinese AI firms.

    China’s overall productivity levels also lag those of other
    advanced economies. Xi’s turn to state-owned enterprises &
    manufacturing certainly won’t improve this relative weakness.

    In short, it's difficult to escape the conclusion that
    China’s economy is systematically weakening & that Xi’s new
    priorities offer little hope for a quick turnaround. The U.S.
    & its allies could further compound Xi’s challenges by
    vigorous enforcement of trade laws, limiting Chinese access
    to technology & financing from the West, & imposing sanctions
    against China’s brutal human-rights abuses in Xinjiang & in
    countries in the developing world that it's trying to exploit
    thru its Belt & Road Initiative. A good example of such
    exploitation is the atrocious mining conditions for key
    battery components cobalt & lithium in Africa & South America.

    A major slowdown or acute financial crisis in China would
    certainly have a negative impact on the global economy. But
    U.S. & allied policy makers do have tools that could both
    influence the direction of the Chinese economy & help repair
    some of the accumulated damage to their economies from
    Chinese mercantilism. A first step is to undermine the
    narrative of a relentless, unstoppable economic advance
    under Xi’s leadership.

    Mr. Duesterberg is a senior fellow at the Hudson Institute
    and author of a new study, “Economic Cracks in the Great
    Wall of China: Is China’s Current Economic Model Sustainable?”

    https://www.wsj.com/articles/slow-meltdown-of-china-economy-evergrande-property-market-collapse-downturn-xi-cewc-11640032283

    --- SoupGate-Win32 v1.05
    * Origin: fsxNet Usenet Gateway (21:1/5)
  • From David P.@21:1/5 to paul polikos on Sun Jan 2 13:09:02 2022
    paul polikos wrote:
    David P. wrote:
    The Slow Meltdown of the Chinese Economy
    By Thomas J. Duesterberg, 12/20/21, Wall St. Journal
    [...] https://www.wsj.com/articles/slow-meltdown-of-china-economy-evergrande-property-market-collapse-downturn-xi-cewc-11640032283
    The U.S. & its allies have many tools to influence China’s
    economy & need to weigh the consequences of an acute crisis
    against the threat its current trajectory poses to the U.S.
    --------
    The US and its allies are getting more and more sick with the Covid virus. The US is experiencing half a million new infections every day! Their economies will be either stagnanting or going down for another year.
    They will look to China for medical supplies of all sorts.
    -----------
    EVERY country needs to get more and more sick with the Covid
    virus, and flu, too! We were all over-populated 50 years ago!
    The scientists called for Zero Population Growth, but everyone
    laughed and said "Fagettaboudit!" People thought they could do
    whatever they wanted & get away with it! No, you can't! The
    Laws of Nature supersede and overrule the human laws!
    --
    --

    --- SoupGate-Win32 v1.05
    * Origin: fsxNet Usenet Gateway (21:1/5)